John Ivison: Harper government may revive direct business subsidies in effort to win Quebec, Atlantic votes

Harper government may revive direct business subsidies in effort to win Quebec, Atlantic votes

“Our government’s top priorities are economic growth, job creation and long-term prosperity,” said Conservative MP Greg Kerr, as he announced the Atlantic Canada Opportunities Agency will fork out $114,000 for a skateboard park in Yarmouth, Nova Scotia.

The MP from West Nova did not state the obvious — that the government’s real top priority is to get re-elected in a region where its Employment Insurance reforms have proven unpopular.

The funding announcement at the beginning of last month ushered in a Yuletide spending spree in which ACOA sprinkled $2.8-million like fairy dust across Nova Scotia and New Brunswick in 17 separate “community infrastructure” improvement releases. Soon, there will be hardly a hockey rink in the region that isn’t renovated or a recreational hall roof that needs to be re-shingled.

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This flurry of politically motivated largesse coincides with a new report from the Canadian Manufacturers and Exporters that reveals the importance of training when it comes to investment decisions. The availability of skilled labour was the second most important factor when companies ranked their investment priorities.

The survey, to be released Friday, is billed as a reality check for government and industry because nearly half of the companies surveyed say they have a skills shortage. Nearly one-third of companies said they could even move production and investment to other jurisdictions as a result of labour shortages.

The really bleak news is that, while they know it is important to train people and promote them internally, many companies say training will decrease over the next three years because cash is under pressure.

“Over 95% of companies currently provide orientation for new employees, health and safety training and training in technical skills. However, companies are reporting that despite the need for training in these areas, training will decrease over the next three years. In fact, fewer than 70% of companies are stating they will offer training in these areas in three years time,” the report on Canada’s labour market said.

‘I really thought we had got out of the business of trying to pick winners a long time ago. This will just create jobs for bureaucrats’

The survey of 649 firms said companies favour training tax credits as a solution to the anticipated cut-back. The CME has long advocated companies that train their workers should get a tax credit against their EI premiums.

Marc Garneau, the Liberal leadership candidate, has suggested a similar scheme to cut payroll taxes for small- and medium-sized companies that provide training.

Yet the prevailing mindset inside government is said to be a return to the kind of direct grant system the Conservatives abandoned when they took office. The Harper government ditched the much-criticized Technology Partnerships program when it came to power.

TPC was panned for lacking transparency and recouping just 6% of the $3.5-billion it distributed to aerospace and hi-tech companies. During the 2004 election, Stephen Harper, then leader of the Opposition, promised to end corporate welfare programs and instead reduce business taxation. He retreated from that position in the 2006 election, in an attempt to woo Quebec and Atlantic Canadian voters, but subsequently reduced corporate tax rates and curtailed some of the worst excesses of programs like TPC.

But there are now fears the government may be in the process of reversing itself. The real concern is that the direct spending will be done by regional development agencies like ACOA, which have proven themselves to be little more than slush-funds for politicians of all stripes. “I really thought we had got out of the business of trying to pick winners a long time ago,” said one senior industry source. “This will just create jobs for bureaucrats.”

The Conservatives are aware that the training issue is at the heart of its competitiveness agenda. The Prime Minister is said to have asked federal government departments to review their funding contribution to provincial training programs, so a broad re-think of the whole training issue is pending.

But if the rumblings from deep within the bureaucracy are proven correct, the response may be less than strategic — resulting in the same quasi-political organizations that dole out money for skateboard parks simply being placed in charge of millions of new training dollars.

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